Compacts of Free Association: Negotiations Should Address Aid Effectiveness and Accountability and Migrants’ Impact on Us Areas
Westin, Susan (2001-12-06). Compacts of Free Association: Negotiations Should Address Aid Effectiveness and Accountability and Migrants’ Impact on Us Areas (Report). Washington, DC: Government Accountability Office. p. 27.
- Has attachment: File:9YYP2WLJ.pdf
Abstract: Direct U.S. Compact funds amounting to $1.6 billion for the FSM and the RMI from fiscal year 1987 through 1998 had limited impact on economic development and were subject to limited accountability. The FSM and the RMI used these funds for general government operations, capital projects such as building roads, or investing in businesses. However, funds used for general government operations helped maintain high government wages and public sector employment that have discouraged private sector growth; and spending to create and improve infrastructure has not contributed to significant economic growth. Moreover, Compact-funded business ventures have generally failed due to poor planning, inadequate construction and maintenance, or misuse of funds. In addition, both the FSM and the RMI remain highly dependent on U.S. assistance despite having made some improvements in economic self-sufficiency, as measured by their governments’ lower reliance on U.S. funding. Further, while the Compact set out specific obligations for reporting and consulting regarding the use of Compact funds, we found that the governments of the FSM, the RMI, and the United States have provided limited accountability over Compact expenditures and have not ensured that the funds were spent effectively. In the case of the U.S. government, oversight was limited by interagency disagreements between the Departments of Interior and State, a lack of resources dedicated to Compact oversight, and Interior’s belief that Compact provisions restricted the Department’s ability to require accountability and withhold funds.
In part due to the lack of economic opportunities in the FSM and the RMI, thousands of citizens of these countries have migrated to the United States resulting in significant impact on three nearby U.S. island areas—Guam, Hawaii, and the CNMI—which are the key destinations for migrants.6 Employment opportunities, education, and family ties were the main reasons for migrating, according to Department of the Interior surveys and information we collected. Further, we found that the migrants to Guam, Hawaii, and the CNMI have generally worked in jobs requiring few skills and received low wages. As a result, most were living in poverty in all three U.S. island areas.7 The reported impact of this migration on Guam, Hawaii, and the CNMI has been significant: at least $371 million in costs to local governments for 1986 through 2000, primarily for health and education services. The U.S. government has provided Compact impact funding in the amount of $41 million to Guam and $3.8 million to the CNMI through fiscal year 2001; however, the governments of both island areas consider this funding inadequate to fully cover the estimated financial impact of these migrants. Hawaii received no compensation through fiscal year 2001. Our work indicated that a reduction in the level of future Compact assistance could spur migration, while targeting assistance to the FSM and the RMI’s health and education sectors could reduce the impact of migration.
Several donor nations and multilateral organizations, including the United States, have given $11.9 billion to Pacific Island nations since 1987, with the primary goal of advancing their economic self-sufficiency and alleviating poverty. However, the major donors believe that many Pacific Island nations will not be able to achieve improvements in development without continued assistance in the foreseeable future or will need assistance indefinitely. They also acknowledge that important trade-offs exist in providing assistance, such as taking into consideration foreign policy objectives. These different motivations for providing assistance have led some countries to place a lower emphasis on accountability and effectiveness issues. In addition, donors have found that there are trade- offs between ensuring effectiveness and accountability and the costs of administering aid. Taking into account these factors, donors have explored and adopted various assistance strategies such as establishing trust funds and stopping assistance under undesirable conditions, such as political instability. Some of these strategies may be useful to negotiators of future U.S. aid.
To address concerns about future U.S. assistance to the FSM and the RMI, in our reports we recommended that the U.S. Secretary of State work with the Congress to develop guidelines regarding the policy objectives for the assistance as well as the amount of assistance and its duration. We also recommended that the Secretary of State direct the Compact negotiator to negotiate provisions that provide greater control over and effectiveness of further U.S. funding to those two nations in any future Compact provisions. With respect to migration, we recommended that the Compact negotiator be charged with considering how to target future health and education funds for the FSM and the RMI in order to address the effect of migration on Guam, Hawaii, and the CNMI.
